CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care for Patients, Lower Healthcare Spending, & Financially Viable Physician Practices & Hospitals

CREATING A PHYSICIAN-LED HEALTHCARE FUTURE Better Care for Patients, Lower Healthcare Spending, & Financially Viable Physician Practices & Hospitals Harold D. Miller President and CEO Center for Healthcare Quality and Payment Reform www.chqpr.org

I Have Nothing to Disclose

A Short Quiz About the U.S. Economy 3

A Short Quiz About the U.S. Economy QUESTION #1: Which U.S. industry told its employees every year for the past decade that their pay would be cut by 15-30% regardless of how well they performed? 4

A Short Quiz About the U.S. Economy QUESTION #1: Which U.S. industry told its employees every year for the past decade that their pay would be cut by 15-30% regardless of how well they performed? ANSWER: Health Care 5

Medicare SGR Is Now Gone, But Physician Pay Is Behind Inflation 28% Lower Than Inflation If SGR Cut Had Been Made 6

A Short Quiz About the U.S. Economy QUESTION #2: In which U.S. industry can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? 7

A Short Quiz About the U.S. Economy QUESTION #2: In which U.S. industry can one set of employees only get a raise if other employees take a pay cut, even when the business is performing well? ANSWER: Health Care 8

Even Without the SGR, Physician Pay Must Be Budget-Neutral Physician Payment Budget Neutrality Payments for Specialists Payments for Specialists Payments for PCPs Payments for PCPs 9

A Short Quiz About the U.S. Economy QUESTION #3: In which U.S. industries are businesses only able to sell their products and services to consumers through an intermediary who demands large discounts and increases prices by 18-25%? 10

Health Plans Spend As Much on Administration/Profit as on Drugs Admin: $110 billion Drugs: $117 billion Physicians Hospitals 12

A Lot of a Physician s Pay Goes To Costs of Dealing with Health Plans Admin: $110 billion Drugs: $117 billion Admin: $30 billion Physicians Hospitals 13

A Short Quiz About the U.S. Economy QUESTION #4: Who is to blame for the way physicians are paid and micromanaged? 14

A Short Quiz About the U.S. Economy QUESTION #4: Who is to blame for the way physicians are paid and micromanaged? ANSWER: Physicians 15

The Blame Rests With Physicians Physicians haven t defined solutions to control healthcare costs without rationing Physicians have allowed themselves to be seen as the causes of higher spending Physicians haven t defined payment models that will support lower-cost, higher-quality care and maintain financial viability for physician practices Physicians aren t organized to manage and deliver high-value population health care to purchasers and patients 16

Three Paths to the Future: Which Door Will Doctors Choose? FUTURE #1 SGR Repeal FUTURE #2 FUTURE #3 17

Door #1: Pay for Performance (AKA Value Based Purchasing ) PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal 18

PROBLEM The Problem That P4P Was Supposed to Solve Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver 19

Bad Solutions Developed by CMS and Other Payers PROBLEM Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver BAD P4P Requiring physicians to deliver high-quality care regardless of whether they are paid adequately to do so Penalizing physicians for quality problems they did not cause and cannot control Penalizing physicians when patients don t receive services they don t need or want 20

Do Physicians Need Incentives to Deliver Higher Value Care? $ P4P QUALITY MEASURES BP Control Lipid Control Anti-Platelet Therapy Bonus Penalty FFS RESOURCE USE MEASURES Total Spending per Patient Spending Per Episode of Care 21

The Problem Isn t Incentives But Unpaid Services Lack of Adequate FFS Payment P4P $ A small bonus may not be QUALITY MEASURES enough to pay for delivering BP Control a high-value service or for Lipid Control the added costs of improving Anti-Platelet quality Therapy A small bonus may not be RESOURCE USE enough to offset the costs of MEASURES collecting and reporting the Total Spending quality data per Patient Spending A small penalty may be less Per Episode Bonus of Care than the loss of Penalty fee-for-service revenue from healthier patients or FFS lower utilization 22

MIPS is Just More P4P On Top of the Same FFS $ +x% -4.5% +x% -6% +x% -9% +x% -10% +4% -4% +5% -5% +7% -7% +9% -9% +9% -9% +9% -9% FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 MIPS Merit-Based Incentive Payment System Quality Resource Use Clinical Practice Improvement Activities EHR Meaningful Use 50% -> 30% 10% -> 30% 15% 25% 23

Docs Will Be Responsible for Costs They Can t Control $ +x% -4.5% +x% -6% +x% -9% +x% -10% +4% -4% +5% -5% +7% -7% +9% -9% +9% -9% +9% -9% FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + PQRS + MU + VBM FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS FFS + MIPS 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Physicians Pay Will Be Based on Total Cost of Care Without the Ability to Control It Quality Resource Use Clinical Practice Improvement Activities EHR Meaningful Use 50% -> 30% 10% -> 30% 15% 25% 24

Door #1: Accountability Without Resources or Flexibility PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal Accountability for: Quality Measures Meaningful Use Practice Improvement Total Spending on Patients No Change in the Services Physicians are Paid For or the Adequacy of Payment 25

Door #2: Alternative Payment Models PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal ALTERNATIVE PAYMENT MODELS (APMs) 26

The Need for Alternative Payment Models PROBLEM Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost 27

The Need for Alternative Payment Models PROBLEM Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost BARRIER #1 No payment or inadequate payment for many high-value services, e.g., Responding to patient phone calls that can avoid office or ER visits Calls among physicians to determine a diagnosis or coordinate care delivery Hiring nurses to help chronic disease patient avoid exacerbations Providing palliative care, not just hospice BARRIER #2 Loss of revenue when patients stay healthy and don t need procedures 28

Bad Alternative Payment Models From CMS and Other Payers PROBLEM Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost BAD PAYMENT MODELS Paying for high-value services only if physicians can reduce total spending Dictating how care should be provided in order to increase payments Paying physicians more if their patients receive fewer services Paying physicians the same amount for all services patients need regardless of how sick the patients are 29

CMS Alternative Payment Models Announced To Date TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 30

CMS Alternative Payment Models Don t Change Current Payments TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 31

Some Provide Additional Upfront Resources to Physicians TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 32

But With Many Strings Attached TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 33

Practice Transformation Required in CMS Oncology Care Model 1. 24/7 patient access to clinicians with real-time access to medical records 2. Meet Meaningful Use requirements for EHR 3. Create care plans with 13 components recommended by IOM 4. Provide patient navigation services 5. Adhere to clinical guidelines for treatment 6. Collect, report, and improve on quality metrics 34

Performance Measures in the CMS Oncology Care Model 1. Percentage of beneficiaries who are treated with therapies consistent with nationally recognized clinical guidelines 2. Provide and attest to 24 hour, 7 days a week patient access to appropriate clinician who has real-time access to practice s medical record 3. Attestation and Use of ONC certified EHRs 4. Submission of all quality measures required by the program team 5. Provide core functions of patient navigation 6. Electronically document a care plan that contains the 13 components in the IOM Care Management Plan 7. Number of emergency department visits per attributed OCM-FFS beneficiary per OCM-FFS episode (Risk adjusted) 8. Number of hospital admissions per attributed OCM-FFS beneficiaries per OCM-FFS episode for (Risk adjusted) 9. Percentage of all Medicare FFS beneficiaries managed by a practice who are admitted to hospice for less than 3 days in the last 30 days of life 10. % of all Medicare FFS beneficiaries managed by a practice who experience more than one emergency department visit in the last 30 days of life 11. % of face-to-face visits to the participating practice in which there is a documented plan of care for pain AND pain intensity is quantified 12. Score on patient experience survey (CAHPS as modified by the evaluation contractor) 13. Percentage of OCM-FFS beneficiary face-to-face visits in which the patient is assessed by an approved patient-reported outcomes tool. This would include a minimum of the PROMIS tool short forms for anxiety, depression, fatigue, pain interference, and physical function 14. Percentage of OCM-FFS beneficiaries that receive psychosocial screening and intervention at least once per OCM-FFS episode 15. Percentage of OCM-FFS beneficiaries with least one palliative care consultation per OCM-FFS episode 16. Mortality rates of OCM-FFS beneficiaries, risk adjusted 17. Number of emergency department visits per OCM-FFS beneficiary in the 6 months following the OCM-FFS episode 18. Number of hospital admissions per OCM-FFS beneficiary in the 6 months following the OCM-FFS episode 19. Number of hospital readmissions per OCM-FFS beneficiary during the OCM-FFS episode and the following 6 months 20. Number of ICU admissions per OCM-FFS beneficiary during the OCM-FFS episode and the following 6 months 21. Proportion of all Medicare FFS beneficiaries managed by a practice not admitted to hospice 22. Proportion of all Medicare FFS beneficiaries managed by a practice receiving chemotherapy in the last 14 days of life 23. % of attributed beneficiaries that receive a follow-up visit from the participating practice within 7 days after discharge from any inpatient hospitalization 24. Percentage of face-to-face encounters between an attributed OCM-FFS beneficiary and a participating practice which include medication reconciliation 25. Breast Cancer: Hormonal therapy for Stage IC-IIIC (ER/PR) Positive Cancer in OCM-FFS beneficiaries 26. Breast Cancer: Combination chemotherapy is considered or administered within 4 months (120 days) of diagnosis for women under 70 with AJCC T1c, or Stage II or Stage III hormone receptor negative breast cancer in OCM-FFS beneficiaries 27. Colon Cancer: Chemotherapy for Stage IIIA through Stage IIIC OCM-FFS beneficiaries with colon cancer 28. Colon Cancer: Adjuvant chemotherapy is considered or administered within 4 months (120 days) of surgery to OCM-FFS beneficiaries under the age of 80 with AJCC III (lymph node positive) colon 29. Prostate Cancer: Adjuvant hormonal therapy for high-risk OCM-FFS beneficiaries 30. Percentage of OCM-FFS beneficiaries with documented ECOG, Karnofsky, or WHO performance status assessment prior to OCM-FFS episode initiation and at episode conclusion 31. Percentage of OCM-FFS beneficiaries that receive tobacco screening and cessation intervention at least once per OCM-FFS episode 32. Percentage of OCM-FFS beneficiaries that have an Influenza Immunization 33. Number of OCM-FFS beneficiaries enrolled in clinical trials at any point during an OCM-FFS episode 34. Prescription drug utilization under Medicare Part B and Part D 35. Radiation utilization by OCM-FFS beneficiaries 36. Imaging utilization by OCM-FFS beneficiaries 37. Post-acute provider utilization by OCM-FFS beneficiaries 38. Therapy service utilization by OCM-FFS beneficiaries 39. Home health services utilization by OCM-FFS beneficiaries 35

Most Only Provide More $ After Other Spending is Reduced TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 36

Models Hold Individual Physicians Accountable for Total Cost of Care TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 37

Higher Payment Only for Patients Attributed to Physician/Provider TYPE OF PROVIDER CMS PROGRAM PAYMENT STRUCTURE Health Systems, PHOs, Multi-Specialty Groups, IPAs, and Dialysis Ctrs Primary Care Specialty Care Hospitals and Post-Acute Care Accountable Care Organizations (MSSP, Pioneer, ESCO) Comprehensive Primary Care Initiative Oncology Care Model Comprehensive Care for Joint Replacement FFS + Shared Savings on Attributed Total Spending FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for State or Region) FFS + PMPM $ for Attributed Patients w/ Detailed Service Specifications + Shared Savings on Attributed Total Spending (for 6-month window) FFS + Hospital Bonuses/Penalties for Attributed Total Spending 38

Problems With Shared Savings Conservative and effective physicians receive little or no additional revenue and may be forced out of business Physicians who have been practicing inefficiently or inappropriately are paid more than conservative physicians Physicians could be rewarded for denying needed care as well as by reducing overuse Physicians are placed at risk for costs they cannot control and random variation in spending Shared savings bonuses are temporary and when there are no more savings to be generated, physicians are underpaid 39

Door #2: Turning Physicians Into Insurance Companies TODAY PAYER-DESIGNED ALTERNATIVE PAYMENT MODELS Accountability for Total Spending, Including Non-Cardiovascular Conditions and Services Delivered by Other Physicians No Change in the Services Physicians are Paid For or the Adequacy of Payment 40

What s Behind Door #3? PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal PAYER-DESIGNED ALTERNATIVE PAYMENT MODELS FUTURE #3 41

Physicians Taking Charge of Payment & Delivery Reform PAY FOR PERFORMANCE ( Value-Based Purchasing ) ( Merit-Based Incentive Payment System ) SGR Repeal PAYER-DESIGNED ALTERNATIVE PAYMENT MODELS PHYSICIAN-DESIGNED ALTERNATIVE PAYMENT MODELS (APMs) 42

Instead of Payer Designed Payment Systems HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead 43

Physicians Should Design Payments to Support Good Care HOW PAYMENT REFORMS ARE DESIGNED TODAY Medicare and Health Plans Define Payment Systems Physicians Have To Change Care to Align With Payment Systems Patients and Physicians May Not Come Out Ahead THE RIGHT WAY TO DESIGN PAYMENT REFORMS Physicians Redesign Care and Identify Payment Barriers Payers Change Payment to Support Redesigned Care Patients Get Better Care and Physicians Stay Financially Viable 44

The Promise of Physician-Focused PROBLEMS Barriers in fee-for-service prevent physicians from delivering higher-quality care at lower total cost Physicians are paid the same amount under fee-for-service regardless of the quality of care they deliver Alternative Payment Models Give physicians adequate resources and flexibility to deliver the kind of care that patients need + + GOOD ALTERNATIVE PAYMENT MODELS Ask physicians to take accountability for improving quality and reducing costs in the aspects of care they can control 45

What Happens When Physicians Redesign Patient Care and Receive Adequate Payments to Support It?

Better Care at Lower Cost for Crohn s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group 47

Better Care at Lower Cost for Crohn s Disease PHYSICIAN LEADER: Lawrence R. Kosinski, MD Managing Partner, Illinois Gastroenterology Group OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS Health plan spends $11,000/year/patient on patients with Crohn s >50% of expenses are for hospital care, most due to complications <33% of patients seen by physician in 30 days prior to hospitalization 10% of expenses for biologics, many administered in hospitals 3.5% of spending goes to gastroenterologists BARRIERS IN THE CURRENT PAYMENT SYSTEM No payment to support medical home services in gastroenterology practice: No payment for nurse care manager No payment for clinical decision support tools to ensure evidencebased care No payment for proactive telephone contact with patients 49

Better Care at Lower Cost for Pregnancy PHYSICIAN LEADER: Steve Calvin, MD Medical Director, Minnesota Birth Center 51

Better Care at Lower Cost for Pregnancy PHYSICIAN LEADER: Steve Calvin, MD Medical Director, Minnesota Birth Center OPPORTUNITIES TO IMPROVE CARE AND LOWER COSTS 33% C-section rate, 2x recommended rate 25% of mothers want to deliver in a birth center, <2% actually do Significantly lower costs for delivery in birth centers than hospitals BARRIERS IN THE CURRENT PAYMENT SYSTEM Inadequate payment or no payment at all for deliveries in birth centers Higher payments to hospitals for C-sections, higher $/hour to physicians for C-sections Impossible to determine or compare total cost of delivery with separate payments for facility, OB/Gyn, pediatrician, and others and separate payments for mother and baby 53

Are the CMS Models the Only Way to Define APMs? CMS APM Models Primary Care Medical Home Episode Payment to Hospital Upside-Only Shared Savings Two-Sided Risk Shared Savings Full-Risk Capitation 55

Models Authorized by ACA/MACRA for Innovation Center to Implement (i) Promoting broad payment and practice reform in primary care, including patient-centered medical home models for high-need applicable individuals, medical homes that address women s unique health care needs, and models that transition primary care practices away from fee-for-service based reimbursement and toward comprehensive payment or salary-based payment. (ii) Contracting directly with groups of providers of services and suppliers to promote innovative care delivery models, such as through risk-based comprehensive payment or salary-based payment. (iii) Utilizing geriatric assessments and comprehensive care plans to coordinate the care (including through interdisciplinary teams) of applicable individuals with multiple chronic conditions and at least one of the following: (I) An inability to perform 2 or more activities of daily living. (II) Cognitive impairment, including dementia. (iv) Promote care coordination between providers of services and suppliers that transition health care providers away from fee-for-service based reimbursement and toward salary-based payment. (v) Supporting care coordination for chronically ill applicable individuals at high risk of hospitalization through a health information technology-enabled provider network that includes care coordinators, a chronic disease registry, and home tele-health technology. (vi) Varying payment to physicians who order advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)) according to the physician s adherence to appropriateness criteria for the ordering of such services, as determined in consultation with physician specialty groups and other relevant stakeholders. (vii) Utilizing medication therapy management services, such as those described in section 935 of the Public Health Service Act. (viii) Establishing community-based health teams to support small-practice medical homes by assisting the primary care practitioner in chronic care management, including patient selfmanagement, activities. (ix) Assisting applicable individuals in making informed health care choices by paying providers of services and suppliers for using patient decision-support tools, including tools that meet the standards developed and identified under section 936(c)(2)(A) of the Public Health Service Act, that improve applicable individual and caregiver understanding of medical treatment options. (x) Allowing States to test and evaluate fully integrating care for dual eligible individuals in the State, including the management and oversight of all funds under the applicable titles with respect to such individuals. (xi) Allowing States to test and evaluate systems of all-payer payment reform for the medical care of residents of the State, including dual eligible individuals. (xii) Aligning nationally recognized, evidence based guidelines of cancer care with payment incentives under title XVIII in the areas of treatment planning and follow-up care planning for applicable individuals described in clause (i) or (iii) of subsection (a)(4)(a) with cancer, including the identification of gaps in applicable quality measures. (xiii) Improving post-acute care through continuing care hospitals that offer inpatient rehabilitation, long-term care hospitals, and home health or skilled nursing care during an inpatient stay and the 30 days immediately following discharge. (xiv) Funding home health providers who offer chronic care management services to applicable individuals in cooperation with interdisciplinary teams. (xv) Promoting improved quality and reduced cost by developing a collaborative of high-quality, low-cost health care institutions that is responsible for (I) developing, documenting, and disseminating best practices and proven care methods; (II) implementing such best practices and proven care methods within such institutions to demonstrate further improvements in quality and efficiency; and (III) providing assistance to other health care institutions on how best to employ such best practices and proven care methods to improve health care quality and lower costs. (xvi) Facilitate inpatient care, including intensive care, of hospitalized applicable individuals at their local hospital through the use of electronic monitoring by specialists, including intensivists and critical care specialists, based at integrated health systems. (xvii) Promoting greater efficiencies and timely access to outpatient services (such as outpatient physical therapy services) through models that do not require a physician or other health professional to refer the service or be involved in establishing the plan of care for the service, when such service is furnished by a health professional who has the authority to furnish the service under existing State law. (xviii) Establishing comprehensive payments to Healthcare Innovation Zones, consisting of groups of providers that include a teaching hospital, physicians, and other clinical entities, that, through their structure, operations, and joint-activity deliver a full spectrum of integrated and comprehensive health care services to applicable individuals while also incorporating innovative methods for the clinical training of future health care professionals. (xix) Utilizing, in particular in entities located in medically underserved areas and facilities of the Indian Health Service (whether operated by such Service or by an Indian tribe or tribal organization (as those terms are defined in section 4 of the Indian Health Care Improvement Act)), telehealth services (I) in treating behavioral health issues (such as post-traumatic stress disorder) and stroke; and (II) to improve the capacity of non-medical providers and non-specialized medical providers to provide health services for patients with chronic complex conditions. (xx) Utilizing a diverse network of providers of services and suppliers to improve care coordination for applicable individuals described in subsection (a)(4)(a)(i) with 2 or more chronic conditions and a history of prior-year hospitalization through interventions developed under the Medicare Coordinated Care Demonstration Project under section 4016 of the Balanced Budget Act of 1997 (42 U.S.C. 1395b 1 note). (xxi) Focusing primarily on physicians services (as defined in section 1848(j)(3)) furnished by physicians who are not primary care practitioners (xxii) Focusing on practices of 15 or fewer professionals. (xxiii) Focusing on risk-based models for small physician practices which may involve two-sided risk and prospective patient assignment, and which examine risk-adjusted decreases in mortality rates, hospital readmissions rates, and other relevant and appropriate clinical measures. (xxiv) Focusing primarily on title XIX, working in conjunction with the Center for Medicaid and CHIP Services; 56

There are Many More Ways to Create Physician-Focused APMs Primary Care Medical Home Episode Payment to Hospital Upside-Only Shared Savings Two-Sided Risk Shared Savings Full-Risk Capitation APM #1: Payment for a High-Value Service APM #2: Condition-Based Payment for a Physician s Services APM #3: Multi-Physician Bundled Payment APM #4: Physician-Facility Procedure Bundle APM #5: Warrantied Payment for Physician Services APM #6: Episode Payment for a Procedure APM #7: Condition-Based Payment 57

How Do You Define a Good Alternative Payment Model?

Step 1: Identify Opportunities to Reduce Related Spending $ Total Spending Relevant to the Physician s Services Physician Practice Revenue Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice OPPORTUNITIES TO REDUCE SPENDING Reduce Avoidable Hospital Admissions Reduce Unnecessary Tests and Treatments Use Lower-Cost Tests and Treatments Deliver Services More Efficiently Use Lower-Cost Sites of Service Reduce Preventable Complications Prevent Serious Conditions From Occurring 59

$ Total Spending Relevant to the Physician s Services Step 2: Identify Barriers in Current Payments That Need to Be Fixed Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services OPPORTUNITIES TO REDUCE SPENDING Reduce Avoidable Hospital Admissions Reduce Unnecessary Tests and Treatments Use Lower-Cost Tests and Treatments Deliver Services More Efficiently Use Lower-Cost Sites of Service Reduce Preventable Complications Prevent Serious Conditions From Occurring Physician Practice Revenue FFS Payments to Physician Practice Unpaid Services BARRIERS IN CURRENT FFS SYSTEM No Payment for Many High-Value Services Insufficient Revenue to Cover Costs When Using Fewer or Lower-Cost Services 60

$ Total Spending Relevant to the Physician s Services Physician Practice Revenue Step 3: Design an APM That Removes the Payment Barriers Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Physician-Focused Alternative Payment Model Flexible, Adequate Payment for Physician s Services 61

$ Total Spending Relevant to the Physician s Services Physician Practice Revenue Step 4: Include Provisions to Assure Control of Cost & Quality Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services Flexible, Adequate Payment for Physician s Services Accountability for Controlling Avoidable Spending 62

$ Total Spending Relevant to the Physician s Services Physician Practice Revenue Alternative Payment Models Fee-for-Service Payment (FFS) Avoidable Spending Payments to Other Providers for Related Services FFS Payments to Physician Practice Unpaid Services Can Be Win-Win-Wins Physician-Focused Alternative Payment Model Savings Avoidable Spending Payments to Other Providers for Related Services Flexible, Adequate Payment for Physician s Services Win for Payer: Lower Total Spending Win for Patient: Better Care Without Unnecessary Services Win for Physician: Adequate Payment for High-Value Services 63

Most of the Money in Healthcare Doesn t Go to Physicians Physicians: 16% 64

How Could This Work for Cardiologists?

Your Real Cardiology Business is More Than Your Salary Cardiologist Salary 66

And More Than Your Total Practice Costs.. Practice Expenses Cardiologist Salary 67

It s the Tests You Order, Even If Someone Else Does Them Tests and Imaging Practice Expenses Cardiologist Salary 68

It s the Procedures You Do, And Where You Do Them Inpatient Procedures Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary 69

And the Unplanned Admissions of Your Patients Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary 70

The Post-Acute Care Costs After Hospital Stays Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary 71

The Unplanned Readmissions and Repeat Procedures Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary 72

And the Number and Types of Medications You Prescribe Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary 73

That Adds Up to a LOT of Money: >$10,000/patient/yr in Medicare Medications Readmissions Post-Acute Care TOTAL AVERAGE COST PER PATIENT (w/o Rx): $10,667 All Other Services $1,157 Post-Acute Care $1,205 Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Inpatient Hospital Stays & ER $4,255 Outpatient Procedures $1,431 Lab Tests & Imaging $1,416 Other Physician Svcs $880 Cardiologist Services $324 Medicare Patients Whose Care Was Directed by a Cardiologist in 4 Midwest States, 2010 Source: Medicare QRUR Reports 2011 74

Medications Readmissions Post-Acute Care Only 3% of the Money Is Going to the Cardiologist TOTAL AVERAGE COST PER PATIENT (w/o Rx): $10,667 All Other Services $1,157 Post-Acute Care $1,205 Inpatient Procedures and Admissions of Chronic Disease Patients Inpatient Hospital Stays & ER $4,255 Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary $100,000 Revenue for Cardiologist Outpatient Procedures $1,431 Lab Tests & Imaging $1,416 Other Physician Svcs $880 Cardiologist Services $324 Medicare Patients Whose Care Was Directed by a Cardiologist in 4 Midwest States, 2010 75

But What the Cardiologist Does Determines Most of the Other 97% Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary $3,200,000 in Total Non-Pharmacy Medicare Expenditures Prescribed, Ordered, or Influenced by Cardiologist $100,000 Revenue for Cardiologist TOTAL AVERAGE COST PER PATIENT (w/o Rx): $10,667 All Other Services $1,157 Post-Acute Care $1,205 Inpatient Hospital Stays & ER $4,255 Outpatient Procedures $1,431 Lab Tests & Imaging $1,416 Other Physician Svcs $880 Cardiologist Services $324 Medicare Patients Whose Care Was Directed by a Cardiologist in 4 Midwest States, 2010 76

Does Cutting Cardiology Fees Create Medicare Savings? (No) Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary $3,200,000 in Total Non-Pharmacy Medicare Expenditures Prescribed, Ordered, or Influenced by Cardiologist $100,000 Revenue for Cardiologist 0.3% Savings for Medicare 9% Reduction in Cardiologist Fees 77

What If Cardiologists Could Redesign Care for Lower Cost? Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary $3,200,000 in Total Non-Pharmacy Medicare Expenditures Prescribed, Ordered, or Influenced by Cardiologist $100,000 Revenue for Cardiologist 5% Reduction in Total Non-Pharmacy Medicare Expenditures Through Redesigned Care 78

Medicare Could Give Cardiologists Significantly More Resources Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary $3,200,000 in Total Non-Pharmacy Medicare Expenditures Prescribed, Ordered, or Influenced by Cardiologist $100,000 Revenue for Cardiologist 5% Reduction in Total Non-Pharmacy Medicare Expenditures Through Redesigned Care 50% Increase in Cardiologist Revenue 79

And Save Far More Than By Cutting Physician Fees Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary $3,200,000 in Total Non-Pharmacy Medicare Expenditures Prescribed, Ordered, or Influenced by Cardiologist $100,000 Revenue for Cardiologist 3% Savings for Medicare 5% Reduction in Total Non-Pharmacy Medicare Expenditures Through Redesigned Care 50% Increase in Cardiologist Revenue 80

Only Cardiologists Can Reduce Costs Without Rationing Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Fewer unnecessary procedures Use of lower-cost procedures Reducing the cost of procedures Use of lower-cost facilities Fewer unnecessary tests Use of lower-cost tests Use of lower cost testing facilities 83

Only Cardiologists Can Reduce Costs Without Rationing Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Fewer unnecessary procedures Reducing the cost of procedures More procedures in outpatient settings Fewer ER visits for chronic disease Fewer admissions for chronic disease ZFewer unnecessary procedures Use of lower-cost procedures Reducing the cost of procedures Use of lower-cost facilities Fewer unnecessary tests Use of lower-cost tests Use of lower cost testing facilities 84

Only Cardiologists Can Reduce Costs Without Rationing Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Less use of expensive inpatient rehab More in-home services Fewer unnecessary procedures Reducing the cost of procedures More procedures in outpatient settings Fewer ER visits for chronic disease Fewer admissions for chronic disease ZFewer unnecessary procedures Use of lower-cost procedures Reducing the cost of procedures Use of lower-cost facilities Fewer unnecessary tests Use of lower-cost tests Use of lower cost testing facilities 85

Only Cardiologists Can Reduce Costs Without Rationing Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Better post-discharge care management Fewer complications from procedures Less use of expensive inpatient rehab More in-home services Fewer unnecessary procedures Reducing the cost of procedures More procedures in outpatient settings Fewer ER visits for chronic disease Fewer admissions for chronic disease ZFewer unnecessary procedures Use of lower-cost procedures Reducing the cost of procedures Use of lower-cost facilities Fewer unnecessary tests Use of lower-cost tests Use of lower cost testing facilities 86

Only Cardiologists Can Reduce Costs Without Rationing Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Use of lower-cost medications Avoiding unnecessary medications Better post-discharge care management Fewer complications from procedures Less use of expensive inpatient rehab More in-home services Fewer unnecessary procedures Reducing the cost of procedures More procedures in outpatient settings Fewer ER visits for chronic disease Fewer admissions for chronic disease ZFewer unnecessary procedures Use of lower-cost procedures Reducing the cost of procedures Use of lower-cost facilities Fewer unnecessary tests Use of lower-cost tests Use of lower cost testing facilities 87

Example: Improving Care and Outcomes for Heart Failure 500 Heart Failure Patients 88

Today: Reactive Care for Chronic Disease, Many Hospitalizations CURRENT $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 500 Heart Failure Patients PCP paid only for periodic office visits (6 visits @ $100/visit) 89

Today: Reactive Care for Chronic Disease, Many Hospitalizations CURRENT $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 Hospitalizations Admissions $10,000 250 $2,500,000 500 Heart Failure Patients PCP paid only for periodic office visits (6 visits @ $100/visit) Patients do not take medications reliably 50% of patients are hospitalized each year for exacerbations 90

Today: Reactive Care for Chronic Disease, Many Hospitalizations CURRENT $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 500 Heart Failure Patients PCP paid only for periodic office visits (6 visits @ $100/visit) Patients do not take medications reliably 50% of patients are hospitalized each year for exacerbations Cardiologist only sees patient during hospital admissions 91

Today: Reactive Care for Chronic Disease, Many Hospitalizations CURRENT $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 Total Spending 500 $2,900,000 500 Heart Failure Patients PCP paid only for periodic office visits (6 visits @ $100/visit) Patients do not take medications reliably 50% of patients are hospitalized each year for exacerbations Cardiologist only sees patient during hospital admissions 92

Most of the Money Isn t Going to the Physicians CURRENT $/Patient # Pts Total $ Physician Svcs PCP $600 500 $300,000 Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 Physicians Are Only Receiving 14% of Total Spending Total Spending 500 $2,900,000 93

Is There a Better Way? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs?? PCP $600 500 $300,000?? Hospitalizations?? Admissions $10,000 250 $2,500,000?? Cardiologist $400 250 $100,000?? Total Spending 500 $2,900,000?? 94

Pay the PCP for Proactive Care Management CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 Total Spending 500 $2,900,000 Pay PCP $75 per patient per month instead of $100 per visit 95

Pay the Cardiologist to Co-Manage The Patient s Care CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 Pay PCP $75 per patient per month instead of $100 per visit Pay Cardiologist $25 per patient per month instead of $100 per hospital day 96

Provide Non-Physician Resources to Support Patients CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 Pay PCP $75 per patient per month instead of $100 per visit Pay Cardiologist $25 per patient per month instead of $100 per hospital day Pay the PCP & cardiologist enough to hire a nurse care manager 97

Can We Afford a 127% Increase in Spending on Ambulatory Care? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 Pay PCP $75 per patient per month instead of $100 per visit Pay Cardiologist $25 per patient per month instead of $100 per hospital day Pay the PCP & cardiologist enough to hire a nurse care manager 98

Yes, If It Succeeds In Reducing Hospitalizations CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 215 $2,150,000-14% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,830,000-2.5% 99

Improved Chronic Disease Mgt Can Potentially Generate Large Savings CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000-40% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,180,000-25% 100

Win-Win-Win for Patients, Physicians, and Payers CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000-40% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,180,000-25% Win for Physicians Win for Patients Win for Payers 101

How Does the Payer Know That Hospital Admissions Will Decrease? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 238 $2,380,000-5% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $3,060,000 +6% 102

Build Accountability for Performance Into the Payment CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 Cardiologist $300 500 $150,000 RN Care Mgr $80,000 P4P on Admits ($200,000) Total $300,000 500 $480,000 +60% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 238 $2,380,000-5% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,860,000-1% 103

Physicians Could Also Be Rewarded for Better Performance CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 Cardiologist $300 500 $150,000 RN Care Mgr $80,000 P4P on Admits $100,000 Total $300,000 500 $780,000 160% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 125 $1,250,000-50% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,030,000-30% 104

Key Difference from MIPS: Higher Payment to Improve Care CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 Cardiologist $300 500 $150,000 RN Care Mgr $80,000 P4P on Admits $100,000 Total $300,000 500 $780,000 160% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 125 $1,250,000-50% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,030,000-30% 105

APM #1: Payment for a High-Value Service Continuation of existing FFS payments Payment for additional services Measurement of avoidable utilization and/or quality/outcomes Adjustment of payment amounts based on performance Updating payments over time 106

Do Wins for Patients, Docs & Payers Require Losses for Hospitals? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000-40% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,180,000-25% Win for Physicians Win for Patients Loss for Hospitals? Win for Payers 107

What Should Matter to Hospitals is Margin, Not Revenues (Volume) 108

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 Hospital Costs Are Not Proportional to Utilization Cost & Revenue Changes With Fewer Patients 20% reduction in volume 7% reduction in cost $1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 Costs. #Patients 109

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 Reductions in Utilization Reduce Revenues More Than Costs Cost & Revenue Changes With Fewer Patients 20% reduction in volume 7% reduction in cost 20% reduction in revenue $1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 Revenues Costs #Patients 110

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 Causing Negative Margins for Hospitals Cost & Revenue Changes With Fewer Patients Payers Will Be Underpaying For Care If Admissions, Readmissions, Etc. Are Reduced $1,000 $980 $960 $940 $920 $900 $880 $860 $840 $820 $800 Revenues Costs #Patients 111

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 $000 But Spending Can Be Reduced Without Bankrupting Hospitals Cost & Revenue Changes With Fewer Patients Payers Can $1,000 Still Save $ $980 Without Causing $960 Negative Margins $940 for Hospital $920 $900 $880 Revenues $860 Costs $840 $820 $800 #Patients 112

Where Does the Hospital Payment Go? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Admissions $10,000 250 $2,500,000 $10,000 150 $1,500,000-40% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,180,000-25% 113

Analyze the Hospital s Cost Structure CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Total $10,000 250 $2,500,000 Cardiologist $400 250 $100,000 Total Spending 500 $2,900,000 114

What Happens When Admissions Are Reduced? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Total $10,000 250 $2,500,000 150 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 115

Continue to Cover the Fixed Costs CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Total $10,000 250 $2,500,000 150 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 116

Save on Variable Costs With Fewer Patients CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $3,700 $555,000-40% Hosp. Margin $300 3% $75,000 Total $10,000 250 $2,500,000 150 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 117

Increase the Hospital s Contribution Margin CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 150 Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 118

Hospital Gets Less Total Revenue, But is Better Off Financially CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 150 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 119

And the Payer Still Spends Less CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 150 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,817,500-3% 120

Win-Win-Win-Win: Better Care, Lower Spending, Viable Providers CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Physicians Win Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hospital Wins Patient Wins $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Payer Wins Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 150 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,817,500-3% 121

What Payment Model Supports This Win-Win-Win-Win Approach? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 150 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,817,500-3% 122

You Don t Want to Try and Renegotiate Individual Fees CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 $14,250 150 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,817,500-3% 123

What Assures The Payer That There Will Be Fewer Admissions? CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 500 $680,000 127% Hospitalizations? Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $10,000 250 $2,500,000 $14,250 150 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending 500 $2,900,000 500 $2,817,500-3% 124

Look at What is Being Spent Today in Total on the Patient s Condition CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 Cardiologist RN Care Mgr Total $300,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Total 250 $2,500,000 Cardiologist $400 250 $100,000 Total Spending $5,800 500 $2,900,000 125

Tell the Payer You ll Do It For Less Than They re Spending Today CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 Cardiologist RN Care Mgr Total $300,000 Hospitalizations Hospital Fixed $6,000 60% $1,500,000 Hosp. Variable $3,700 37% $925,000 Hosp. Margin $300 3% $75,000 Total 250 $2,500,000 Cardiologist $400 250 $100,000 Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500-3% 126

Use the Payment as a Budget to Redesign Care CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 500 $450,000 +50% Cardiologist 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $2,500,000 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500-3% 127

And Let Providers Decide How They Should Be Paid CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $2,500,000 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500-3% 128

Condition-Based Payment Puts the Providers in Charge of Care & Pmt CURRENT FUTURE $/Patient # Pts Total $ $/Pt # Pts Total $ Chg Physician Svcs PCP $600 500 $300,000 $900 500 $450,000 +50% Cardiologist $300 500 $150,000 +50% RN Care Mgr $80,000 Total $300,000 $680,000 127% Hospitalizations Hospital Fixed $6,000 60% $1,500,000 $1,500,000-0% Hosp. Variable $3,700 37% $925,000 $555,000-40% Hosp. Margin $300 3% $75,000 $82,500 +10% Total $2,500,000 $2,137,500-15% Cardiologist $400 250 $100,000 $0 Total Spending $5,800 500 $2,900,000 $5,635 500 $2,817,500-3% 129

APM #7: (Full) Condition-Based Payment 130

Reducing Admits Is Just One Way Cardiologists Can Reduce Spending Medications Readmissions Post-Acute Care Inpatient Procedures and Admissions of Chronic Disease Patients Outpatient Procedures Tests and Imaging Practice Expenses Cardiologist Salary Use of lower-cost medications Avoiding unnecessary medications Better post-discharge care management Fewer complications from procedures Less use of expensive inpatient rehab More in-home services Fewer unnecessary procedures Reducing the cost of procedures More procedures in outpatient settings Fewer ER visits for chronic disease Fewer admissions for chronic disease ZFewer unnecessary procedures Use of lower-cost procedures Reducing the cost of procedures Use of lower-cost facilities Fewer unnecessary tests Use of lower-cost tests Use of lower cost testing facilities 131

Other Opportunities: Reducing Unnecessary Tests/Procedures 132

Four Steps to Successful Alternative Payment Models 1. What are the opportunities to improve care and reduce/control costs? 2. What are the barriers in the current payment system? 3. What changes in payment would enable physicians to improve care? 4. How will the physician take accountability for achieving the promised results? 133

Should Doctors Fear the Risks of Alternative Payment Models? Risks Under Payment Reform Will the additional payment or bundled payment be adequate to cover the services patients need? Will the physician be able to reduce the avoidable spending? Will risk adjustment be adequate to control for differences in need? How will you ensure other providers involved in the care of patients perform their roles effectively? Will you have enough patients to cover the costs of managing the new payment? 134

It s Not More Risk Than Today, It s Just Different Risk Risks Under FFS Will fee levels from payers be adequate to cover the costs of delivering services? What utilization controls will payers impose on your services? What value-based reductions will be made in your payments based on efficiency measures? What value-based reductions will be made in your fees based on quality measures? Will you have enough patients to cover your practice expenses? Risks Under Payment Reform Will the additional payment or bundled payment be adequate to cover the services patients need? Will the physician be able to reduce the avoidable spending? Will risk adjustment be adequate to control for differences in need? How will you ensure other providers involved in the care of patients perform their roles effectively? Will you have enough patients to cover the costs of managing the new payment? 135

Protections For Physicians Against Taking Inappropriate Risk Risk Stratification: The payment rates would vary based on objective characteristics of the patient and treatment that would be expected to result in the need for more services or increase the risk of complications. Outlier Payment or Individual Stop Loss Insurance: The payment would be increased if spending on an individual patient exceeds a pre-defined threshold. An alternative would be for the provider to purchase individual stop loss insurance (sometimes referred to as reinsurance) and include the cost of the insurance in the payment bundle. Risk Corridors or Aggregate Stop Loss Insurance: The payment would be increased if spending on all patients exceeds a pre-defined percentage above the payments. An alternative would be for the provider to purchase aggregate stop loss insurance and include the cost of the insurance in the payment bundle. Adjustment for External Price Changes: The payment would be adjusted for changes in the prices of drugs or services from other providers that are beyond the control of the provider accepting the payment. Excluded Services: Services the provider does not deliver, or order, or otherwise have the ability to influence would not be included as part of accountability measures in the payment system. 136

Heart Failure ACC Has Done Some Work in Developing Cardiology APMs ACC Oregon Chapter worked with primary care physicians in 2014 to develop a Condition-Based Alternative Payment Model for heart failure Ischemic Heart Disease (SMARTCare) ACC received a $16 million grant from the CMS Innovation Center in 2014 to implement ACC appropriate use criteria for testing and interventions for stable angina Initial work has been done to develop an Alternative Payment Model to continue the project after funding ends and to adequately support the costs of cardiac testing and interventions for appropriate patients 137

How Does All This Fit Into ACOs and Population Health? 138

Patients Have Many Healthcare Needs PATIENTS Heart Disease Diabetes Back Pain Pregnancy 139

Each Patient Should Choose & Use a Primary Care Practice PATIENTS Heart Disease Diabetes Back Pain Pregnancy Primary Care Practice 140

Which Takes Accountability for What PCPs Can Control/Influence MEDICARE, MEDICAID HEALTH PLAN PATIENTS Heart Disease Diabetes Back Pain Pregnancy Accountable Medical Home Primary Care Practice Accountability for: Avoidable ER Visits Avoidable Hospitalizations Unnecessary Tests Unnecessary Referrals Adequate Preventive Care 141

With a Medical Neighborhood to Consult With on Complex Cases MEDICARE, MEDICAID HEALTH PLAN PATIENTS Heart Disease Diabetes Back Pain Pregnancy Accountable Medical Home Primary Care Practice Endocrinology, Cardiology, Physiatry Accountable Medical Neighborhood Accountability for: Appropriate Use of Testing and Interventions Improving Chronic Disease Management 142

PATIENTS Heart Disease Diabetes Back Pain Pregnancy..And Specialists Accountable for the Conditions They Manage Accountable Medical Home MEDICARE, MEDICAID HEALTH PLAN Primary Care Practice Cardiology, Endocrinology, Physiatry Accountable Medical Neighborhood Accountability for: Using Appropriate Procedures Avoiding Complications of Procedures Cardiology Group Neurosurg. PMR Group OB/GYN Group Heart Episode/ Condition Pmt Back Surgery Episode Pmt Pregnancy Condition Pmt 143

PATIENTS Heart Disease Diabetes Back Pain Pregnancy That s Building the ACO Accountable Medical Home from the Bottom Up MEDICARE, MEDICAID HEALTH PLAN Primary Care Practice Cardiology, Endocrinology, Physiatry Accountable Medical Neighborhood Accountable Payment Models Cardiology Group Neurosurg. PMR Group OB/GYN Group ACO Heart Episode/ Condition Pmt Back Surgery Episode Pmt Pregnancy Condition Pmt 144

Most ACOs Today Aren t Truly Reinventing Care Fee-for-Service Payment MEDICARE, MEDICAID HEALTH PLAN Shared Savings Payment PATIENTS Heart Disease Expensive IT Systems ACO Nurse Care Managers Diabetes Back Pain Share of Shared Savings Payment?? Pregnancy Primary Care PMR Cardiology Orthopedics Neurosurg. OB/GYN 145

Medicare ACOs Aren t Succeeding Due to Flaws in Payment Model 2013 Results for Medicare Shared Savings ACOs 46% of ACOs (102/220) increased Medicare spending Only one-fourth (52/220) received shared savings payments After making shared savings payments, Medicare spent more than it saved 2014 Results for Medicare Shared Savings ACOs 45% of ACOs (152/333) increased Medicare spending Only one-fourth (86/333) received shared savings payments After making shared savings payments, Medicare spent more than it saved 146

PATIENTS Heart Disease Diabetes Back Pain Pregnancy A True ACO Can Take a Global Payment And Make It Work Accountable Medical Home MEDICARE, MEDICAID HEALTH PLAN, EMPLOYER Primary Care Practice Cardiology, Endocrinology, Physiatry ACO Accountable Medical Neighborhood Risk-Adjusted Global Payment Cardiology Group Neurosurg. PMR Group OB/GYN Group Heart Episode/ Condition Pmt Back Surgery Episode Pmt Pregnancy Condition Pmt 147

You Don t Need a Big Health System to Manage Global Payment Independent PCPs & Specialists Managing Global Payments North Texas Specialty Physicians, a 600 physician multi-specialty IPA in Fort Worth, set up its own Medicare Advantage PPO plan and uses revenues from the health plan and capitation contracts to pay its PCPs 250% of Medicare rates and provides high quality, coordinated care to patients. www.ntsp.com Joint Contracting by MDs & Hospitals for Global Payments The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital jointly contract with three major Boston-area health plans for full-risk capitation. The IPA is independent of the hospital; they coordinate care with each other without any formal legal structure. www.macipa.com 148

Three Paths to the Future: Which Will Cardiologists Choose? #1 PAYER-DESIGNED PAY FOR PERFORMANCE TODAY #2 #3 PAYER-DESIGNED ALTERNATIVE PAYMENT MODELS PHYSICIAN-DESIGNED CARE DELIVERY & PAYMENT SYSTEMS 149

If You Don t Like Doors 1 & 2, What Should You Do? 150

If You Don t Like Doors 1 & 2, What Should You Do? 1. Continue listening to PowerPoint presentations at ACC.16, go back home, continue business as usual, and hope somebody else figures this out 151

If You Don t Like Doors 1 & 2, What Should You Do? 1. Continue listening to PowerPoint presentations at ACC.16, go back home, continue business as usual, and hope somebody else figures this out 2. Plan to retire before 2019 3. Tell ACC leadership that developing cardiologyspecific alternative payment models should be a top priority for the College and you want to help 153

Learn More About Win-Win-Win Payment and Delivery Reform www.paymentreform.org 154